This contributed post is for informational purposes only. Please consult a business, financial and legal professional before making any decisions. We may earn money or products from the affiliate links in this post.
As far as business ventures go, buying into a franchise offers a lower risk and greater return on your investment than investing in a new startup. When you purchase a franchise from a brand holder or parent company, you’re provided with most of the training, equipment, strategies, and more you’ll need to thrive. But buying into a franchise doesn’t come without challenges. Before you start the process of buying one, here’s what to know about buying a business franchise.
What’s Your Budget?
Buying a franchise doesn’t simply involve a single purchase of a fee and equipment. You need to spend money to make money, so make sure you have saved enough to handle the various costs associated with running a business. Marketing and advertising are important, for instance. Even with a name brand behind you, you still need to let people know who you are, where you’re located, and how they can buy your products or employ your services. Look into the costs associated with your new business and ensure you have enough savings to cover six months of operation before turning a profit. Make sure you won’t be finished before you start.
Talk to Established Franchise Owners
It’s important to learn from our mistakes, but it’s wiser to learn from others. Talk to other franchisees outside of your proposed territory and ask them how they got started, what obstacles they faced at the beginning, the costs involved, how corporate acted and reacted in certain situations, and so forth. Check the web for success stories, and more importantly, franchisees who failed to take off, and you’ll encounter a wealth of warnings and lessons. Take notes and refer to them when drafting your own business strategy and plans.
Learn from the Past
When considering what to know about buying a business franchise, look into the history of the franchise, its sales, and the success rate of individual businesses. Ensure the area and market you intend to work in has the potential for a faithful clientele and room for growth. Look into local competition. A little competition is a good thing for everyone, but if there aren’t enough customers to go around or a particular business dominates the scene, you might want to find another place to hang your shingle. Learn the territory.
Review the Forms Before You Sign
Take time to read everything connected with buying the franchise before you sign it. Even better, enlist an attorney to review the paperwork with you and search the verbiage for anything that doesn’t seem on the up and up. This can protect you and prevent issues from cropping up in the future. A legal review can also help ensure that the agreement complies with all relevant local, regional, and federal laws.
Before buying a franchise, do all you can to ensure you stay on the right side of success!